LONDON FINANCE.

Auckland Star, Volume LVI, Issue 258, 31 October 1925, Page 6

LONDON FINANCE.

AN ECONOMIC RIDDLE. THE FOREIGN LOANS EMBARGO. Five months ago (writes the city editor oi the ""Manchester Guardian," , under date .September 23) two theories were prevalent as to what would happen when we returned to the gold standard. On the one hand, there was the fear that the first consequence would be an efflux of gold on such a scale as to lead to excessively high discount rates on the London market, and, on the other, there were tho.--e who held that after a possible short transition period the foreign exchanges would turn in our favour and an influx of gold ensue which might reach the point of embarrassment. Certainly no one prophesied the state of affairs in existence at the moment, which, indeed, is a curious combination of the two possibilities which were in fact envisaged. For our resent; position is that while the foreign exchanges "are adverse—the Xew York rate at 4.54 i is scarcely more than J cent above gold export point— and while gold is actually leaving our shores the internal situation is one of sheer monetary glut, with the three months" market rate a full 1 per cent tjelow the reduced bank rate. Xo wonder that bankers, brokers and students of finance are perplexed to the point of mystification, for before the war it "would have seemed like madness to be talking: of a further fall in the bank rate with the dollar rate below 4.5."> — and that was before we fell under the "domination" of Xew York! No wonder ■that they complain that a new "offside" Tule has been imported into the game and has upset all the old notions of formation and strategy! Yet is it not rather the conventions than the written laws which have changed? Before the war the London money market was an international market: it is less so now. Then foreign borrowers came freely to London to obtain credits when money was cheaper here than elsewhere. Credit is less mobile now. That is due partly to obvious reasons, the currency breakdown almost throughout Europe and the general shattering of confidence which Jias led British financial house* and British investors to look with distrust en foreign requests for credit. But. apart from that, we have in the last yeir deliberately increased the inevitable immobility by imposing an unofficial but effective embargo on all public issues of foreign loans. There were, of course, reasons, if not completely convincing reasons, for that step. We were engaged in restoring the pound to gold parity, and we did not wish to risk the failure of that attempt which an uncontrolled outflow of capital might have involved. Our trade balance became heavily adverse, and though the proceeds of overseas loans must V»p taken out in the form of goods the intermediate processes wlt'ch may occur bpforp that happens might have been embarrassing if not worse. Has not the time now come when •we might safely relax these restrictions? Short-term credit i« now so plentiful that therp seems .lto reason to fear that a few foreign loans would •upset the market or jeopardise th» interests of domestic borrowers. Whatever chansre* may have taken place in the economic organisation of the world it is. at any rate, certain that if oiir export trade is to revive we must TesTime our established pn«tom of selling largely on credit. There i.« much development work to be done in_ the outlying part 3of the world. If we are to take'our sharp in it ct rnnnot refuse tha necessary financ : al .instance. Ought we not. before wp conclude that demand for credit ba= so shrunk that the bank rate must b P reduced, to test the market by relaxing, if not rescinding, the embargo nn foroisn issties and so senking better employment, not .=o much for f»ir monpv capital but for our fixed capital and onr ■workers? HUME PIPE COMPANY. ANNUAL MEETING. The llfth annual meeting- or the Hume Pipe Company, whose balance sheet lias already been' summarised in these columns was hem in Melbourne recently, in his report to shareholders, the chairman, or directors, the Hon. L. J. Clifford, The capital invested in the business has grown rrom £30,000 to £500.000 in four year 3 and the company's business has been extended throughout Australia and Zealand, excepting- the State or Kew South Wales, where the rights are owned by the Government. Necessarily, a considerable amount or pioneering: work has had to be done, and a large amount of research -work has been necessary In order to improve the standard or our product. In addition, there has had to be met preliminary expenses in connection with the formation or the company, amounting: to over £-23.000, and duringthe past live years we have raced expenditure to the extent or £25,000, being the cost or the completion and repairs to pipe lines, in respect or contracts taken, over rrom Hume Bros. Cement Iron Company Ltd. These expenses, to which all 'new Industries are subject, will not recur and the years to rollow will reap the benellt or that expenditure. The growth or the company has been rapid, and In comparison with other companies floated at about the same time, we may claim that the company has met with a fair measure or success. Against this year's profits we have written off the amount or £2038 9/5, being- the expenses incurred during tne year ended 30th June, 1924 in connection with opening up business In New Zealand; and we have also appropriated rrom profits the sum of £6222 4-/5, being the balance or underwriter's commission and brokerage. Our business in the Dominion is now firmly established, and our operations there during the past year were most successrul. The directors hope that the extension ot the business to New 5 Zealand will materially assist in stabilising profits. CANADA'S BUTTER EXPORT. During , the twelve months ended July Canada has doubled her exports or butter rrom 1i million lb to 29 million lb. This year's July exports alone were 5 million 3b, while last year's were only a million. Exports or cheese are growing rapidly, but not to the same extent; In the same period exports rose rrom 1,192,353 cwt. to 1,40i,493cwt. DIRECTORS REDUCE THEIR FEE t>l At J^ c annual meeting- or the Hume Pipe Company In Melbourne, arter a divitinnrrt°^ SeVen per cenl nad keen sane " "onett, trie chairman or directors, the Hon. elected.saß. U ° Uad just been re " shatewiSers^iSrt 1 , e ' eneral meeting or ing a mviaena £n ' ana we were pay " , holders Increased th U p , er cem - the shareJJon trom £tooo tn- d !. r n e £ tors * r «nunerafchlcn amount -° 8< J°«aooo Per annum, directors, other than ?. red ,? y tne '<»» who is paid a salarfU ™" w - R - Hume. l>uj. as the pront!Pa?« Raging-director and we are payinV a l e c £? w not so good move thawthe «vMenS? i tors, excluding: Mr. \v S n ? r tne directne rate or £250 each-A Mume - ne at . £1000, in ail. ana I sLii Pe £ annum;-or shareholder ym-seconoTgL ™ lad lr ■ motion was duly seconaea^n motlon -" Tht v .*•«» •.carried.